Stocks jump as oil prices fall sharply

NEW YORK  Wall Street rebounded sharply Friday as a surge in the dollar and a resulting drop in oil prices eased some of investors' worries about losses at mortgage finance company Fannie Mae. The Dow Jones industrial average jumped more than 300 points.

The blue chips' gains more than wiped out big losses from the previous session and left the Dow with an advance of more than 400 points for the week.

The resurgent dollar and the drop in oil sent a wave of confidence through the stock market. Commodities investors, fearing a change in the market's broader direction, rushed to snap up stocks. Light, sweet crude fell $4.82 a barrel to settle at $115.20 on the New York Mercantile Exchange, bringing its decline over the past four weeks to more than $30.

Investors see the drop in oil as a big boost for the economy, because it should allow consumers to spend more freely. For the moment, that has allowed the market to set aside worries about the financial sector, which is still contending with the fallout from the credit crisis.

Fresh financial worries surfaced Friday after Fannie Mae, the largest U.S. buyer and backer of home loans, reported a quarterly loss more than three larger than what Wall Street had expected.

The drop in oil also overshadowed a Labor Department report showing that U.S. workers' efficiency grew at a slightly slower pace in the second quarter as companies sought to produce more with smaller work forces. But gains in wages and benefits also slowed; keeping compensation in check can help contain inflation.

According to preliminary calculations, the Dow rose 302.89, or 2.65 percent, to 11,734.32. The blue chips fell nearly 225 points Thursday after concerns about the financial sector, a weak showing by retailers in July and a spike in weekly unemployment claims.

But with Friday's gains, the Dow rose 408 points, or 3.6 percent, for the week.